March 19, 2009
To the Stockholders of
TORCHMARKCORPORATION(the Company):
Torchmark’s 2009 annual meeting of stockholders will be held at Company headquarters, 3700 South Stonebridge Drive, McKinney, Texas 75070 at 10:00 a.m., Central Daylight Time, on Thursday, April 30, 2009. The meeting will be conducted using Robert’s Rules of Order and Torchmark’s Shareholder Rights Policy. This policy is posted on Torchmark’s web site at http://www.torchmarkcorp.com or you may obtain a printed copy by writing to the Corporate Secretary at 3700 South Stonebridge Drive, McKinney, Texas 75070.
The accompanying notice and proxy statement discuss proposals which will be submitted to a stockholder vote. If you have any questions or comments about the matters discussed in the proxy statement or about the operations of your Company, we will be pleased to hear from you.
It is important that your shares be voted at this meeting. Please mark, sign, and return your proxy or vote over the telephone or on the Internet. If you attend the meeting, you may withdraw your proxy and vote your stock in person if you desire to do so.
We hope that you will take this opportunity to meet with us to discuss the results of operations of the Company during 2008.
Sincerely,
Mark S. McAndrew
Notice of Annual Meeting of Stockholders to be held April 30, 2009
To the Holders of Common Stock of
TORCHMARKCORPORATION
The annual meeting of stockholders of Torchmark Corporation will be held at Company Headquarters, 3700 South Stonebridge Drive, McKinney, Texas 75070 on Thursday, April 30, 2009 at 10:00 a.m., Central Daylight Time. Directions to attend the annual meeting where you may vote in person can be found on our website: www.torchmarkcorp.com. The meeting will be conducted in accordance with Robert’s Rules of Order and Torchmark’s Shareholder Rights Policy. You will be asked to:
(1) Elect the four nominees shown in the proxy statement as directors to serve for their designated terms or until their successors have been duly elected and qualified.
(2) Consider ratification of the appointment of Deloitte & Touche LLP as the independent registered public accounting firm of the Company.
(3) Approve amendments to the Company’s Amended and Restated By-Laws providing for majority voting for directors, advance notice of nominations and proposals and other necessary conforming and implementing changes.
(4) Transact any other business that properly comes before the meeting.
The Board of Directors recommends that you vote FOR Proposals (1), (2) and (3) above. These matters are more fully discussed in the accompanying proxy statement.
The close of business on Monday, March 2, 2009 is the date for determining stockholders who are entitled to notice of and to vote at the annual meeting. You are requested to mark, date, sign, and return the enclosed form of proxy in the accompanying envelope, whether or not you expect to attend the annual meeting in person. You may also choose to vote your shares over the telephone or on the Internet. You may revoke your proxy at any time before it is voted at the meeting.
The annual meeting may be adjourned from time to time without further notice other than by an announcement at the meeting or at any adjournment. Any business described in this notice may be transacted at any adjourned meeting.
By Order of the Board of Directors
Carol A. McCoy
Vice President, Associate Counsel & Secretary
McKinney, Texas March 19, 2009
Important Notice Regarding the Availability of Proxy Materials for the Shareholder Meeting to be held on April 30, 2009:
PROXY STATEMENT
Solicitation of Proxies
The Board of Directors of Torchmark Corporation (the Company) solicits your proxy for use at the 2009 annual meeting of stockholders and at any adjournment of the meeting. The annual meeting will be held at the Company Headquarters, 3700 South Stonebridge Drive, McKinney, Texas 75070 at 10:00 a.m., Central Daylight Time on Thursday, April 30, 2009. Mark S. McAndrew and Larry M. Hutchison are named as proxies on the proxy/direction card. They have been designated as directors’ proxies by the Board of Directors.
If the enclosed proxy/direction card is returned, properly executed, and in time for the meeting, your shares will be voted at the meeting. All proxies will be voted in accordance with the instructions set forth on the proxy/ direction card. If proxies are executed and returned which do not specify a vote on the proposals considered, those proxies will be votedFORproposals 1, 2 and 3. You have the right to revoke your proxy by giving written notice of revocation addressed to the Secretary of the Company at 3700 South Stonebridge Drive, McKinney, Texas 75070 at any time before the proxy is voted at the meeting.
The proxy/direction card is considered to be voting instructions furnished to the respective trustees of each of the Torchmark Corporation Savings and Investment Plan, the Profit-Sharing and Retirement Plan of Liberty National Life Insurance Company and the Liberty National Life Insurance Company 401(k) Plan with respect to shares allocated to individual’s accounts under these plans. If the account information is the same, participants in one or more of the plans who are also shareholders of record will receive a single card representing all their shares. If a plan participant does not return a proxy/direction card to the Company, the trustees of any plan in which shares are allocated to the participant’s individual account will vote those shares in the same proportion as the total shares in that plan for which directions have been received.
A plurality vote of the holders of the issued and outstanding common stock of the Company represented in person or by proxy at the stockholders meeting is required to elect directors. A simple majority vote of the holders of the issued and outstanding common stock of the Company represented in person or by proxy at the stockholders meeting is required to ratify the appointment of the Company’s independent registered public accounting firm. A vote of 80% of the holders of the issued and outstanding common stock represented in person or by proxy at the Stockholders’ meeting is required to adopt the amendments to the Company’s Amended and Restated By-Laws. Abstentions are considered as shares present and entitled to vote. Abstentions have the same legal effect as a vote against a matter presented at the meeting. Any shares for which a broker or nominee does not have discretionary voting authority under applicable New York Stock Exchange rules will be considered as shares not entitled to vote and will not be considered in the tabulation of the votes.
Record Date and Voting Stock
Each stockholder at the close of business on March 2, 2009 is entitled to one vote for each share of common stock held on that date upon each proposal to be voted on by the stockholders at the meeting. At the close of business on March 2, 2009, there were 83,684,765 shares of common stock of the Company outstanding. There is no cumulative voting of the common stock. Pursuant to a policy adopted by the Board of Directors, voting is confidential, with exceptions made to allow the Company to contact shareholders so as to reach quorum for meetings, in the event of a contested election and in the event comments are included on a proxy/direction card.
Principal Stockholders
The following table lists all persons known to be beneficial owners of more than five percent of the Company’s outstanding common stock as of December 31, 2008, as indicated from Schedule 13G filings with the Securities and Exchange Commission.
Name and Address
Number of Shares
Percent of Class
Franklin Resources, Inc. Charles B. Johnson Rupert H. Johnson, Jr. One Franklin Parkway San Mateo, CA 94403-1906 Templeton Global Advisors Limited Templeton Building
Lyford Cay
Nassau, Bahamas 8,083,472(1) 9.5%
Pzena Investment Management, LLC 120 West 45th Street, 20th Floor
New York, New York 10036 5,376,433(2) 6.32%
Barclays Global Investors, NA Barclays Global Fund Advisors 400 Howard Street
San Francisco, CA 94105 Barclays Global Investors, Ltd. Murray House
1 Royal Mint Court London, EC3N 4HH
Barclays Global Investors Japan Limited Ebisu Prime Square Tower—8th Floor 1-1-39 Hiroo Shibuya-Ku
Tokyo 150-8402 Japan
Barclays Global Investors Canada, Limited Brookfield Place
161 Bay Street, Suite 2500 (P.O. Box 614) Toronto, Canada
Ontario M5J 2S1
Barclays Global Investors Australia Limited Level 43 Grosvenor Place
225, George Street (P.O. Box N43)
Sydney, Australia NSW 1220 4,368,747(3) 5.14
(1) Franklin Resources, Inc. (FRI), a Delaware corporation, and Charles B. Johnson and Rupert H. Johnson, Jr. (Principal Shareholders), who each own in excess of 10% of the common stock of FRI, hold no shares of Torchmark stock directly. FRI and the Principal Shareholders disclaim beneficial ownership in all reported securities. All shares are beneficially owned by one or more open- or closed-end investment companies or other managed accounts that are investment management clients of investment managers that are direct and indirect subsidiaries of FRI (Investment Management Subsidiaries), including Templeton Global Advisors
Limited. Investment Management Subsidiaries report the following and disclaim beneficial ownership of the same: Adviser Subsidiary Power to Vote or Direct Vote Power to Dispose or Direct Disposition
Sole Sole Shared
Templeton Global Advisors Limited . . . 6,132,024 6,209,524 10,240 Franklin Templeton Investment Management Limited . . . 471,019 1,233,307
Templeton Investment Counsel, LLC . . . 87,000 87,000 37,420 Franklin Templeton Investments Australia Limited . . . 71,461 56,220 15,241 Franklin Templeton Investments (Asia) Limited . . . 150,230 353,660
Franklin Advisors, Inc. . . 35,630 35,630 Franklin Templeton Investments Corp. . . 18,730 18,730 Franklin Templeton Investments Japan Limited . . . 3,490 3,490 Fiduciary Trust Company International . . . 9,800 9,800 Templeton Asset Management Ltd . . . 9,610 9,610 Franklin Templeton Portfolio Advisors, Inc. . . 3,600 3,600
(2) Pzena Investment Management, LLC, a Delaware investment adviser, has sole power to vote or direct the vote on 4,626,701 shares and sole power to dispose or direct the disposition of 5,376,433 shares.
(3) All shares reported are held by company as detailed below in trust accounts for the economic benefit of the beneficiaries of those accounts.
Power to Vote Power to Dispose
Company or Direct Vote or Direct Disposition
Sole Sole
Barclays Global Investors, NA . . . 1,957,292 2,521,156 Barclays Global Fund Advisors . . . 926,021 931,358 Barclays Global Investors, Ltd. . . 435,372 507,298 Barclays Global Investors Japan Limited . . . 360,251 360,251 Barclays Global Investors Canada Limited . . . 44,189 44,189 Barclays Global Investors Australia Limited . . . 4,522 4,522
PROPOSAL NUMBER 1
Election of Directors
The Company’s By-laws provide that there will be not less than seven nor more than fifteen directors with the exact number to be fixed by the Board of Directors. In February 2007, the Board fixed the number of directors at ten persons.
The Board of Directors proposes the election of David L. Boren, M. Jane Buchan, Robert W. Ingram and Paul J. Zucconi as directors, to hold office for a term of three years, expiring at the close of the annual meeting of stockholders to be held in 2012 or until their successors are elected and qualified. Ms. Buchan’s and Messrs. Boren, Ingram and Zucconi’s current terms expire at the 2009 Annual Meeting of Stockholders. The term of office of the other six directors continues until the close of the annual meeting of stockholders in the year shown in the biographical information below or until their successors are elected and qualified.
Non-officer directors first elected to the Board of Directors prior to April 28, 2005 retire from the Board of Directors at the annual meeting of stockholders which immediately follows their 78th birthday. Non-officer directors first elected to the Board after April 28, 2005 retire from the Board at the annual meeting of stockholders immediately following their 74th birthday. Directors who are employees/officers of the Company retire from active service as directors at the annual stockholders meeting immediately following their 65th birthday.
If any of the nominees becomes unavailable for election, the directors’ proxies will vote for the election of any other person recommended by the Board of Directors unless the Board reduces the number of directors.
The Board recommends that the stockholders voteFORthe nominees.
Profiles of Directors and Nominees(1)
Charles E. Adair (age 61) has been a director since April 2003. His term expires in 2010. He is also a director of Tech Data Corporation, and PSS World Medical, Inc. Principal Occupation: Partner, Cordova Ventures, Montgomery, Alabama, a venture capital management company since December 1993.
David L. Boren (age 67) has been a director of the Company since April 1996. He is also a director of AMR Corporation, Hiland Partners, L.P. and Texas Instruments, Inc. Principal occupation: President of The University of Oklahoma, Norman, Oklahoma since November 1994.
M. Jane Buchan (age 45) has been a director of the Company since October 2005. Principal Occupation: Chief Executive Officer and Managing Director of Pacific Alternative Asset Management Company, LLC, Irvine, California, an institutional fund of funds for pension plans of corporations, state governments and foreign retirement trusts, since March 2000.
Robert W. Ingram (age 60) has been a director of the Company since October 2005. Principal Occupation: Ross-Culverhouse Professor of Accounting in Culverhouse College of Commerce, University of Alabama, Tuscaloosa, Alabama since August 1992. (Senior Associate Dean, Culverhouse College of Commerce 2004-May, 2008 and Director, Culverhouse School of Accountancy, University of Alabama, 2002—2004).
Joseph L. Lanier, Jr. (age 77) has been a director of the Company since 1980. His term expires in 2010. He is also a director of Flowers Foods and Alliance One International, Inc. Principal occupation: Retired textile executive. (Chairman of the Board of Dan River Incorporated, Danville, Virginia, a textile manufacturer, November 1989-August 2006; Chief Executive Officer of Dan River Incorporated November 1989-February 2005).
Mark S. McAndrew (age 55) has been a director of the Company since July 1998. His term expires in 2011. Principal occupation: Chairman since February 2006 and Chief Executive Officer since August 2005 of the Company. (Chairman of Insurance Operations of the Company, February 2003-August 2005; Executive Vice President of the Company, September 1999-February 2003; Chief Executive Officer September 1999-August 2005 and President October 1991-August 2005 of Globe; President October 1991-July 2004 and Chief Executive Officer September 1999-July 2004 of United American; President and Chief Executive Officer of American Income, September 1999-December 2003.)
Lloyd W. Newton (age 66) has been a director of the Company since April 2006. His term expires in 2010. He is also a director of Goodrich Corporation and Sonocco Products Company. Principal Occupation: Consultant. (Executive Vice President Military Engines of Pratt & Whitney, Hartford, Connecticut, a manufacturer of aircraft engines, gas turbines and space propulsion systems, August 2000-March 2006).
Sam R. Perry (age 74) has been a director of the Company since October 2004. His term expires in 2011. Principal occupation: Attorney in Private Practice, Austin, Texas, since October 2004. (Shareholder and Of Counsel at Sneed Vine & Perry P.C., Austin, Texas December 2003-September 2004.)
Lamar C. Smith (age 61) has been a director of the Company since October 1999. His term expires in 2011. Principal Occupation: Retired financial services executive. (Chairman January 1992-January 2007 and Chief Executive Officer 1990-April 2007 of First Command Financial Services, Inc., Fort Worth, Texas, a financial services company providing insurance, mutual funds and banking services to current and former commissioned and non-commissioned military officers; Chairman of First Command Bank, a subsidiary of First Command Financial Services, Inc., May 2007 - September 2007).
Paul J. Zucconi (age 68) has been a director of the Company since July 2002. He is also a director of Titanium Metals Corporation, American Beacon Funds and Affirmative Insurance Holdings, Inc. Principal occupation: Business Consultant, Plano, Texas, since January 2001.
(1) Liberty, Globe, United American, American Income and UILIC as used in this proxy statement refer to Liberty National Life Insurance Company, Globe Life And Accident Insurance Company, United American Insurance Company, American Income Life Insurance Company and United Investors Life Insurance Company, subsidiaries of the Company.
PROPOSAL NUMBER 2
Approval of Auditors
A proposal to ratify the appointment of the firm of Deloitte & Touche LLP as the independent registered public accounting firm of the Company for the year ending December 31, 2009 will be presented to the stockholders at the annual meeting. Deloitte & Touche LLP served as the independent registered public accounting firm of Torchmark, auditing the financial statements of the Company and its subsidiaries for the fiscal year ended December 31, 2008 and has served in this capacity since 1999. The Audit Committee of the Board has appointed Deloitte & Touche LLP to serve as the Company’s independent registered public accounting firm for 2009 and has recommended that the stockholders ratify the appointment of Deloitte & Touche LLP for 2009.
A representative of Deloitte & Touche LLP is expected to be present at the meeting and available to respond to appropriate questions and, although the firm has indicated that no statement will be made, an opportunity for a statement will be provided.
If the stockholders do not ratify the appointment of Deloitte & Touche LLP, the selection of an independent registered public accounting firm will be reconsidered by the Audit Committee of the Board of Directors.
The Board recommends that stockholders voteFORthe proposal.
PROPOSAL NUMBER 3
Approval of Amendments to the Company’s Amended and Restated By-Laws
On October 30, 2008, the Board of Directors adopted, subject to stockholder approval at the 2009 Annual Meeting of Stockholders, amendments to Articles II and III of the Amended and Restated By-Laws (the “By-Laws”) to (i) change the voting standard in uncontested director elections from plurality voting to majority voting, (ii) add advance notice provisions requiring stockholders to give notice to the Company of a stockholder’s director nominees or other business to be brought by a stockholder before an annual meeting of stockholders and (iii) make other conforming changes necessary to implement the majority voting and advance notice provisions as well as certain miscellaneous changes described in more detail below. On February 2, 2009, the Board modified certain aspects of the timing in the proposed advance notice provisions. The amendments to Articles II and III of the By-Laws will become effective as of the date that they receive the required vote for approval by the Company’s stockholders.
A summary of the proposed amendments to Articles II and III of the By-Laws is set forth below. This summary is qualified in its entirety by the full text of Articles II and III as proposed to be amended, which is attached to this Proxy Statement asAppendix A.
Summary of Amendments
Purpose.While the Company’s current By-Laws only require that director nominees receive a plurality of the stockholder votes cast at an annual meeting of stockholders to be elected, historic results reflect that the Company’s director nominees actually received by a majority of the votes cast at annual meetings. The Board of Directors, after considering a unanimous recommendation from the Governance and Nominating Committee and with the complete support of Company management, has determined that it is desirable to formally adopt in the Company’s By-Laws the good governance practice of majority voting in uncontested director elections.
The purposes of the advance notice provisions, which require a stockholder to provide prior written notice to the Company of the stockholder’s director nominees or other business to be brought by the stockholder at a meeting, are to facilitate an orderly meeting and to ensure that stockholders receive revelant information about matters to be voted on at a meeting prior to that meeting.
The purposes of other proposed changes to Articles II and III of the By-Laws are either to implement the majority voting and advance notice provisions or to conform language in these Articles II and III to precisely reflect Company practices.
Majority Voting.In uncontested elections for directors, the proposed By-Law amendments provide that each director will be elected by a majority of the votes cast with respect to the director (meaning more votes are cast “for” than “against” the nominee’s election). Directors will be elected by a plurality of votes cast if a stockholder has nominated a person for director and that nomination is not withdrawn at least seven days prior to the date on which the Company mails its proxy statement. If directors are subject to being elected by a plurality vote, then stockholders will not be allowed to vote against a nominee.
Subject to stockholder approval of these By-Law amendments, the Governance and Nominating Committee of the Board of Directors has established a separate policy pursuant to which (1) an incumbent director who is not elected in an uncontested election will offer to tender his or her resignation to the Board; (2) the Governance and Nominating Committee will make a recommendation to the Board whether to accept or reject the resignation or whether other actions should be taken; (3) the Board will act on this recommendation within 90 days after the date on which the election results are certified and (4) within four business days after the Board’s decision, the Company will file a Form 8-K with the SEC publicly disclosing the decision. This director resignation policy provides that director nominees will submit, at the time they are nominated, a contingent resignation which will become effective only if (i) that director fails to receive a majority vote in an uncontested election and (ii) the Board accepts the resignation in accordance with the By-Laws and the policy. If an incumbent director fails to receive a sufficient number of votes to be re-elected, the Governance and Nominating Committee will consider the director’s tendered resignation and, within 75 days following the date of the revalent stockholders’ meeting where the election occurred, make a recommendation to the Board regarding acceptance or rejection of the resignation. The committee will consider all relevant factors in making its recommendation, including but not limited to, any stated reason(s) why stockholders voted against that director’s re-election, special qualifications of the director (for example, serving as the “audit committee financial expert” on the Audit Committee), whether the resignation would cause the Company to be in violation of any of its governing documents, legal or regulatory requirements or stock exchange rules, and whether the resignation would be in the best interests of the Company and its stockholders. The committee will also consider a range of potential alternatives concerning the tendered resignation as they deem appropriate including, but not limited to, accepting the resignation, rejecting the resignation, or rejecting the resignation with a commitment to seek to address and cure the underlying reasons the committee believed led to the director receiving a majority “against” vote. After receiving the Governance and Nominating Committee’s recommendation, the Board will make its decision regarding the resignation not later than 90 days after the date election results are certified. Within four business days after the Board’s decision, the Company will file a Form 8-K with the SEC disclosing the Board’s decision, process, and rationale. Directors whose resignations are being considered under this policy cannot participate in the Governance and Nominating Committee’s or Board’s deliberations, the committee’s recommendation or the Board’s determination with respect to the resignation.
Advanced Notice.The proposed By-Law amendments will require stockholders who wish to nominate a person for election to the Board of Directors or to bring business before a stockholders meeting (whether as a proposal in the Company’s proxy statement or otherwise) to comply with certain procedures including the timing and content of the advance notice provisions.
Advanced Notice for Business (Other than Director Nominations) at Annual Meetings. To be properly brought before an annual meeting of stockholders by a stockholder, business (other than director nominations) must be timely submitted by a notice in writing to the Corporate Secretary of the Company. This advance notice must be delivered to, or mailed to and received at, the Company’s principal executive offices not later than the close of business on the 60thday or earlier than the close of business on the 90thday prior to the anniversary date
of the prior year’s annual meeting of stockholders. If the Company adjusts the annual meeting date to be more than 30 days before or more than 70 days after that anniversary date, then the advance notice must be received at the Company not earlier than the close of business on the 120thday prior to the annual meeting and not later than
the close of business on the later of the 60thday prior to the annual meeting or the 10thday following the day on
The advance notice must contain with respect to each matter which the stockholder wishes to be considered at the annual meeting (i) a brief description of the business, including the complete text of any resolutions or proposed By-Law amendments relating to the business brought before the meeting, (ii) the name and address of the stockholder proposing the business and any stockholder associated person(s), (iii) the class and number of shares of stock owned beneficially or of record by the stockholder and any stockholder associated person(s), supported by documentary evidence, (iv) any material interest, including any direct or indirect financial interest in the proposed business, (v) any agreement(s) that the stockholder has with anyone in connection with the proposed business, (vi) a description of any derivative positions, hedging or other various techniques, positions, or economic or voting interests held by or to which the stockholder or any stockholder associated person(s) is a party with respect to Company stock and whether and the extent to which this has been done to mitigate loss or manage risk of stock price changes or to increase the voting power of the stockholder or any stockholder associated person(s) with respect to Company stock, (vii) a representation that the stockholder is a record holder entitled to vote at the meeting and will be present at the meeting in person or by proxy to propose the business and (viii) a representation whether the stockholder or any stockholder associated person(s) or a group of which they are a part intends to send a proxy statement and form of proxy to Company stockholders and/or otherwise solicit proxies from stockholders in support or the proposal.
The chairman of the meeting must determine and declare to the meeting whether the business was properly brought before the meeting in accordance with these advance notice provisions. If the chairman determines that the business was not properly brought before the meeting, the business cannot be transacted. If the stockholder or his/her qualified representative does not appear at the annual meeting of stockholders to present the business, the business will not be considered even though the Company has received voted proxies regarding the business.
Stockholders must still comply with all applicable requirements of the Securities Exchange Act of 1934, as amended (the Exchange Act), and accompanying regulations. Notwithstanding the time frames set out above for providing advance notice, for any matters proposed to be presented by a stockholder in the Company’s proxy statement pursuant to and in compliance with Rule 14a-8 under the Exchange Act, notice will be considered timely if it has been delivered within the time period specified in Rule 14a-8(e) under the Exchange Act, however, the stockholder proposing the matter must still provide the information in the notice as discussed above.
Advance Notice of Director Nominations.Stockholders of the Company may nominate persons for election as a director of the Company at the annual meeting of stockholders or at a special meeting of stockholders called for the purpose of electing one or more directors to the Board. To properly nominate a person for election as a director of the Company, the stockholder making the nomination must timely submit a written notice making the nomination to the Corporate Secretary of the Company. This advance notice for a director nomination at an annual meeting must be delivered to, or mailed to and received at, the Company’s principal executive offices not later than the close of business on the 60thday or earlier than the close of business on the 90thday prior to the
anniversary date of the prior year’s annual meeting of stockholders. If the Company adjusts the annual meeting date to be more than 30 days before or more than 70 days after that anniversary date, then the advance notice must be received at the Company not earlier than the close of business on the 120thday prior to the annual
meeting of stockholders and not later than the close of business on the later of the 60thday prior to the annual
meeting or the 10thday following the day on which the Company first announced the changed meeting date. If
the nomination is being made at a special meeting, the advance notice of the nomination must be delivered to, or mailed to and received at, the Company’s principal executive offices not earlier than the 90thday prior to the
special meeting and not later than the close of business on the later on the 60thday prior to the special meeting or
the 10th day following the day on which public announcement first made of the special meeting and of the
nominees proposed by the Board of Directors for election at the special meeting.
The advance notice of a nomination must contain for each nominee (i) the name, age and business and residence addresses of the person, (ii) the class and number of shares of the Company which are beneficially owned by the person, (iii) a description of all arrangements, understandings or relationships between the stockholder and the nominee pursuant to which the nomination is being made or with whom the stockholder is
affiliated, associated or otherwise acting in concert, (iv) all information on the nominee which would be required by a National Association of Insurance Commissioners (NAIC) Biographical Affidavit and attachments, (v) a notarized affidavit signed by the person stating that, if elected as a member of the Board of Directors, he or she will serve, that he or she is eligible to be elected to the Board and that, if he or she will be named in the Company’s proxy statement as a nominee for director, he or she consents to being named in the proxy statement as a nominee, (vi) a completed independence questionnaire which can be obtained from the Corporate Secretary, (vii) a description of any voting commitments and/or other arrangements or obligations by which the person is or will be bound as a director and (viii) any other information required to be disclosed in a proxy statement on Schedule 14A for solicitation of proxies for the election of directors under the Exchange Act or pursuant to the requirements of any other governmental body or stock exchange on which the Company is listed. The advance notice must also contain information regarding the stockholder including (i) the name and address of the stockholder, its principals and any stockholder associated person(s) on whose behalf the nomination is being made as well as of any 10% stockholders of the stockholder and any stockholder associated person(s), (ii) the class and number of shares of Company stock which are owned beneficially or of record by the stockholder and any stockholder associated person(s), including documentary evidence thereof, (iii) a list of all stockholder proposals and director nominations made by the stockholder during the prior 10 years, (iv) a list of all litigation filed against the stockholder and/or the principals of the stockholder during the prior 10 years asserting a breach of fiduciary duty or a breach of loyalty, (v) a representation that the stockholder is a record holder entitled to vote at the meeting and intends to appear in person or by proxy at the meeting to nominate the person or persons specified in the notice, (vi) a description of any derivative positions, hedging or other various techniques, positions, or economic or voting interests held by or to which the stockholder or any stockholder associated person(s) is a party with respect to Company stock and whether and the extent to which this has been done to mitigate loss or manage risk of stock price changes or to increase the voting power of the stockholder or any stockholder associated person(s) with respect to Company stock, (vii) if the stockholder is an individual, all information required by the NAIC Biographical Affidavit and attachments, and (viii) a representation whether the stockholder or any stockholder associated person(s) or a group of which they are a part intends to send a proxy statement and form of proxy to Company stockholders and/or otherwise solicit proxies from stockholders in support of the nomination.
The chairman of the meeting must determine and declare to the meeting whether the nomination was properly made in accordance with these advance notice provisions. If the chairman determines that the nomination was not properly made, the defective nomination will be disregarded. If the stockholder or his/her qualified representative does not appear at the annual meeting of stockholders to present the nomination, the nomination will not be considered even though the Company has received voted proxies in the election.
Stockholders must still comply with all applicable requirements of the Exchange Act and accompanying regulations in connection with the making of director nominations.
Miscellaneous Provisions.The proposed amendments to Articles II and III of the By-Laws contain the following conforming and miscellaneous changes:
(i) clarification that the only business that can be brought before a special meeting of stockholders is the business in the Company’s meeting notice except in the case of a special meeting called by the Company for the express purpose of electing directors, where stockholders have the right to nominate directors as provided in Article III of the By-Laws;
(ii) clarification that the written resignation of a director, Board committee member or officer may specify whether it will be effective at a particular time, on receipt by the Chief Executive Officer or Secretary or at the pleasure of the Board of Directors. If no specification is made, the resignation will be deemed effective at the pleasure of the Board of Directors.
(iii) confirmation of past practice that if a director is appointed to the Board of Directors to fill a vacancy on the Board (whether created by death, removal, resignation or due to an increase in the size of the Board), that director will stand for election at the next succeeding annual meeting of stockholders;
(iv) addition of a reference to the Governance and Nominating Committee and deletion of an inadvertent reference to the Executive Committee in Article III, Section 6 on Election of Committee Members; and (v) clarification that if the Board of Directors determines to act by unanimous consent without a meeting, the
consent may be in writing or by e-mail, both of which are permitted by Delaware law.
Potential Anti-Takeover Effects of Certain Amendments to the By-Laws
As a result of the specific timing and content requirements of the advance notice provisions set forth in the proposed amendments to the By-Laws (Section 7 of Article II and Section 2 of Article III), the proposed amendments may have the effect of making more difficult a stockholder nomination for the election of directors or the submission by stockholders of other proposals. The advance notice provisions may discourage a stockholder from conducting a solicitation of proxies to elect the stockholder’s own slate of directors or otherwise attempting to obtain control of the Company. Therefore, the proposed amendments containing these advance notice provisions could be deemed to have an anti-takeover effect because they may impede or discourage efforts by potential bidders to obtain control of the Company or make difficult the removal of management. The proposed amendments could prevent the Company’s stockholders from selling their shares at higher than market prices by deterring unfriendly mergers, tender offers or other efforts to obtain control of the Company.
The advance notice provisions contained within the proposed amendments to the By-Laws do not give the Board of Directors or management the power to approve or disapprove stockholder nominations for the election of directors or any other proposal submitted by stockholders made in accordance with the procedural requirements. The advance notice provisions contained in the proposed amendments would not affect the timing requirements under the Exchange Act for submitting stockholder proposals for inclusion in the proxy statement for the annual meeting of stockholders, nor would they apply to questions that a stockholder may wish to ask at the annual meeting.
While some stockholders may find the potential anti-takeover effect of the proposed amendments to be disadvantageous, the Board of Directors of the Company believes that the advance notice provisions will significantly benefit the Company by promoting continuity and stability in the Company’s management, policies and procedures.
Certain other provisions that are applicable to the Company under Delaware law and that are set forth in the Company’s Certificate of Incorporation, as amended (the Certificate of Incorporation), and By-Laws presently exist that could have anti-takeover effects, including the following:
• Delaware Law. The Company is subject to Section 203 of the Delaware General Corporation Law, which restricts specified business combinations between the Company and an “interested stockholder” or its affiliates or associates for a period of three years following the time that the stockholder becomes an “interested stockholder.” Under some circumstances, Section 203 makes it more difficult for a person who would be an “interested stockholder” to effect various business combinations with a corporation for a three-year period.
• Number of Directors; Classified Board of Directors; Filling Vacancies; Removal.The Company’s By-Laws provide that the number of directors on the Board of Directors shall consist of not less than seven nor more than 15 persons, with the exact number to be fixed by a majority vote of the Board. The Company’s Board is divided into three classes, and the directors serve three-year terms. This classification of directors could have the effect of making it more difficult for stockholders to change the composition of the Board. At least two annual meetings of stockholders, instead of one, are generally required to effect a change in a majority of the Board. Such a delay may help ensure that the Board, if confronted by a stockholder attempting to force a proxy contest, a tender or exchange offer or an extraordinary corporate transaction, would have sufficient time to review the proposal and to act in what they believe to be the best interest of the stockholders. The classification provisions could also
have the effect of discouraging a third party from initiating a proxy contest, making a tender offer or otherwise attempting to obtain control of the Company, even though such attempt might be beneficial to the Company and its stockholders.
The Company’s By-Laws provide that any vacancies on the Board of Directors will be filled by the affirmative vote of a majority of the remaining directors, or, if all directors have been removed, by a majority vote of the stockholders. Accordingly, the Board could prevent any stockholder from enlarging the Board and filling the new directorships with such stockholder’s own nominees.
The By-Laws further provide that directors may be removed only for cause and only upon the affirmative vote of at least 80% of the Company’s voting stock.
• No Stockholder Action by Written Consent; Special Meetings. The provisions of the Company’s Certificate of Incorporation and By-Laws that prohibit stockholder action by written consent and permit special meetings to be called only at the request of a majority of the Board of Directors may have the effect of delaying consideration of a stockholder proposal until the next annual meeting. The provisions also prevent the holders of a majority of the Company’s voting stock from unilaterally using the written consent procedure to take stockholder action. Further, a stockholder could not force stockholder consideration of a proposal over the opposition of a majority of the Board of Directors by calling a special meeting of stockholders prior to the time such directors believe consideration to be appropriate. • Fair Price Provisions Involving Business Combinations. The Company’s Certificate of Incorporation
contains a “fair price” provision that applies to certain business combination transactions involving any person, entity or group that beneficially owns at least 10% of the Company’s aggregate voting stock, such person, entity or group being referred to as an “interested stockholder.” This provision requires the affirmative vote of the holders of not less than 80% of the Company’s voting stock to approve certain transactions between an interested stockholder or its affiliates and the Company or its subsidiaries. This “fair price” provision could have the effect of delaying or preventing a change in control of the Company in a transaction or series of transactions that does not satisfy the stated criteria.
• Amendments. The affirmative vote of holders of not less than 80% of the Company’s voting stock, voting together as a single class, is required to alter, amend, adopt any provision inconsistent with or repeal certain provisions of the Company’s Certificate of Incorporation and By-Laws, including the anti-takeover provisions herein discussed.
• Issuance of Additional Preferred Stock. The Company’s Certificate of Incorporation authorizes the Board of Directors to create and issue additional preferred stock for such consideration and on such terms as it may determine. The rights assigned to a series of preferred stock by the Board, including voting, dividend and conversion rights, may delay, discourage or prevent a change in control of the Company.
Although the advance notice provisions contained within the proposed amendments to the By-Laws may also have anti-takeover effects, these provisions are not being proposed in response to any known effort or threat to acquire control of the Company. The proposed amendments are not part of a plan by the Board of Directors or management to adopt a series of amendments to the Company’s Certificate of Incorporation or By-Laws having an anti-takeover effect, and the Board and management do not currently intend to propose other anti-takeover measures in future proxy solicitations.
Required Vote
In order to be adopted, this proposal must receive the affirmative vote of a 80% of the shares of common stock eligible to be voted at the Annual Meeting. As a result, any shares not voted (whether by abstention, broker non-vote or otherwise) will have the same effect as a vote against the proposal. Unless instructed to the contrary, shares represented by the proxies will be voted to approve the amendments to Articles II and III of the Amended and Restated By-Laws of the Company.
Recommendation of the Board
The Board has unanimously approved the proposed amendments to the By-Laws and recommends that shareholders vote FOR the approval of the proposed amendments.
OTHER BUSINESS
The directors are not aware of any other matters which may properly be and are likely to be brought before the meeting. If any other proper matters are brought before the meeting, the persons named in the proxy, or in the event no person is named, Mark S. McAndrew and Larry M. Hutchison will vote in accordance with their judgment on these matters.
INFORMATION REGARDING DIRECTORS, NOMINEES AND EXECUTIVE OFFICERS
Executive Officers
The following table shows certain information concerning each person deemed to be an executive officer of the Company, except those persons also serving as directors. Each executive officer is appointed by the Board of Directors of the Company or its subsidiaries annually and serves at the pleasure of that board. There are no arrangements or understandings between any executive officer and any other person pursuant to which the officer was selected.
Name
Current Age
Principal Occupation and Business Experience
for the Past Five Years
Danny H. Almond . . . 57 Vice President and Chief Accounting Officer of Company since February 2007. (Vice President, Accounting of Company, December 2005 - February 2007; Senior Vice President,
Accounting of United American, October 1999 - December 2005). Gary L. Coleman . . . 56 Executive Vice President and Chief Financial Officer of Company
since September 1999.
Vern D. Herbel . . . 51 Executive Vice President and Chief Administrative Officer of Company since April 2006; Chief Executive Officer of United American since July 2004; Executive Vice President of Globe and American Income since May 2002. (President July 2004 -November 2007 and Executive Vice President August 2002 - July 2004 of United American).
Charles F. Hudson . . . 52 President and Chief Executive Officer of Globe since August 2005. (Senior Vice President of Globe, August 2001 - August 2005). Larry M. Hutchison . . . 55 Executive Vice President and General Counsel of Company since
September 1999.
Andrew W. King . . . 51 President and Chief Marketing Officer of United American since November 2007; President and Chief Marketing Officer of Liberty since January 2006. (President, Branch Office Marketing Division of United American, September 1999 - January 2006).
Anthony L. McWhorter . . . 59 Chief Executive Officer of Liberty and UILIC since September 1999; President of UILIC since September 1998. (Executive Vice President of Company, September 1999 - April 2006; President of Liberty, December 1994 - January 2006).
Rosemary J. Montgomery . . . 59 Executive Vice President and Chief Actuary of Company since September 1999.
Roger C. Smith . . . 56 President and Chief Executive Officer of American Income since December 2003. (President—American Income Marketing Division, January 2002 - December 2003).
W. Michael Pressley . . . 57 Vice President and Chief Investment Officer of Company since April 2006. (Corporate Actuary of Company, September 2002 -April 2006).
Glenn D. Williams . . . 49 Executive Vice President and Chief Marketing Officer of Company since August 2005. (Senior Vice President, Marketing of Company, March - August 2005; Executive Vice President of Globe and United American, September 1999 - March 2005).
Stock Ownership
The following table shows certain information about stock ownership as of December 31, 2008 for the directors whose terms continue after this Annual Meeting of Stockholders, the director nominees and executive officers of the Company, including shares with respect to which they have the right to acquire beneficial ownership on or prior to March 1, 2009.
Company Common Stock or Options Beneficially Owned as of
December 31, 2008(1)(2)
Name and City of Residence Directly(3) Indirectly(4)
Charles E. Adair . . . . Montgomery, AL 37,000 0 David L. Boren . . . . Norman, OK 15,031 0 M. Jane Buchan . . . . Corona Del Mar, CA
28,000 0 Robert W. Ingram . . . . Tuscaloosa, AL 23,690 0 Joseph L. Lanier, Jr. . . . Lanett, AL 64,876 74,986 Mark S. McAndrew . . . . McKinney, TX 755,100 11,195 Lloyd W. Newton . . . . Lithia, FL 18,960 0 Sam R. Perry . . . . Austin, TX 33,251 0 Lamar C. Smith . . . . Fort Worth, TX 72,062 0 Paul J. Zucconi . . . . Plano, TX 38,900 3,725 Gary L. Coleman . . . . Plano, TX 599,506 17,612 Vern D. Herbel . . . . McKinney, TX 182,888 29,969 Charles F. Hudson . . . . Prosper, TX 115,432 2,484 Larry M. Hutchison . . . . Duncanville, TX 528,927 12,651 Andrew W. King . . . . Plano, TX 310,487 11,799 Anthony L. McWhorter . . . . Birmingham, AL 464,056 7,878 Rosemary J. Montgomery . . . . Parker, TX 499,189 576 Roger C. Smith . . . . Lucas, TX 220,185 493 Glenn D. Williams . . . . Plano, TX 148,887 2,398 Danny H. Almond . . . . Plano, TX 77,753 4,094 W. Michael Pressley . . . . Garland, TX 40,729 172
All Directors, Nominees and Executive Officers as a group:(5) . . . 4,274,909 180,032 (1) No directors, director nominees or executive officers beneficially own 1% or more of the common stock of
the Company.
(2) Messrs. Coleman, Almond and Pressley own 4,000, 13,100 and 1,550 Torchmark Capital Trust III Trust Originated Preferred Securities, respectively, directly. Mr. Zucconi owns 1,500 Torchmark Capital Trust III Trust Originated Preferred Securities indirectly through a family limited partnership.
(3) Includes: for Adair, 33,211 shares; for Boren, 12,000 shares; for Buchan, 24,000 shares; for Ingram, 18,000 shares; for Lanier, 30,000 shares; for McAndrew, 647,023 shares; for Newton, 18,000 shares; for Lamar Smith, 59,842 shares; for Zucconi, 38,900 shares; for Perry, 30,000 shares; for McWhorter, 448,605 shares; for Coleman, 458,007 shares; for Hutchison, 435,783 shares; for Montgomery, 404,479 shares; for Pressley, 40,329 shares; for Roger Smith, 213,485 shares; for Herbel, 175,488 shares; for Hudson, 107,328 shares; for Williams, 122,564 shares; for King, 259,487 shares; for Almond, 71,313 shares and for all directors, executive officers and nominees as a group, 3,647,844 shares, that are subject to presently exercisable Company stock options.
Shares reported for McAndrew include 85,310 shares which are pledged. Shares reported for King include 42,500 shares which are pledged. Shares reported for McWhorter include 10,650 shares which are pledged. (4) Indirect beneficial ownership includes shares (a) owned by the director, executive officer or spouse as
trustee of a trust or executor of an estate, (b) held in a trust in which the director, executive officer or a family member living in his home has a beneficial interest, (c) owned by the spouse or a family member living in the director’s, executive officer’s or nominee’s home or (d) owned by the director or executive officer in a personal corporation or limited partnership. Indirect beneficial ownership also includes approximately 11,195 shares, 1,686 shares, 17,612 shares, 172 shares, 12,651 shares, 11,619 shares, 493 shares, 2,398 shares, 2,484 shares, 11,799 shares and 576 shares calculated based upon conversion of stock unit balances held in the accounts of Messrs. McAndrew, McWhorter, Coleman, Pressley, Hutchison, Herbel, Roger Smith, Williams, Hudson, King and Ms. Montgomery, respectively, in the Company Savings and Investment Plan to shares. Indirect ownership for Mr. McWhorter also includes approximately 6,192 shares calculated based upon conversion of his stock unit balance in the Profit Sharing & Retirement Plan of Liberty (PS&R Plan) to shares. Indirect ownership for Mr. Herbel also includes 9,175 shares held in his living trust and 9,175 shares held in his spouse’s living trust.
Indirect ownership for Mr. Zucconi includes 3,725 shares held in a family limited partnership. Indirect ownership for Mr. Lanier includes 56,074 shares held by a family partnership, 16,512 shares owned by his spouse and 2,400 shares owned by his children. Mr. Lanier disclaims beneficial ownership of 16,512 shares owned by his spouse and 2,400 shares owned by his children.
(5) All directors, nominees and executive officers as a group, beneficially own 4.79% of the common stock of the Company.
CORPORATE GOVERNANCE
Director Independence Determinations
The New York Stock Exchange (NYSE) rules require that Torchmark have a majority of independent directors. The rules provide that no director will qualify as “independent” unless the Board of Directors affirmatively determines that the director has no material relationship with Torchmark and its subsidiaries (collectively, Torchmark), either directly or as a partner, shareholder or officer of an organization that has a relationship with the Company. In order to assist in the making of these determinations, the Board has adopted certain categorical standards described below to assist it in making determinations of independence.
The categorical standards for independence determinations adopted by the Board of Directors are:
i. A director who is an employee, or whose immediate family member is an executive officer, of the Company is not “independent” until three years after the end of such employment relationship.
ii. A director who receives, or whose immediate family member receives, more than $120,000 in any twelve month period in direct compensation from Torchmark other than director and committee fees and pension or other forms of deferred compensation for prior service (provided such compensation is not contingent in any way on continued service), is not “independent” until three years after he or she ceases to receive more than $120,000 in any twelve month period in such compensation.
iii. A director who is a current partner or employee of the firm that is the Company’s internal or external auditor; a director who has an immediate family member who is a current partner of the Company’s internal or external audit firms; a director who has an immediate family member who is a current employee at such a firm and who personally works on the Company’s audit; or a director or a director who has an immediate family member who was within the last three years a partner or employee of such a firm and personally worked on the Company’s audit during that time will not be deemed “independent”.
iv. A director who is employed, or whose immediate family member is employed, as an executive officer of another company where any of Torchmark’s present executive officers serve on that company’s compensation committee is not “independent” until three years after the end of such service or the employment relationship.
v. A director who is a current employee, or whose immediate family member is a current executive officer, of a company that makes payments to, or receives payments from, Torchmark for property or services in an amount which, in any single fiscal year, exceeds the greater of $1 million, or 2% of such other company’s consolidated gross revenues, is not “independent” until three years after falling below such threshold. The Board further adopted the following additional categorical standards for determining director independence on February 23, 2005, which were reviewed, amended and restated on February 20, 2007:
1) An independent director does not directly or indirectly beneficially own more than 10% of any class of the Company’s equity securities.
2) If a Company director is an executive officer of another company in which the Company owns a common stock interest in excess of 5% of total shareholder’s equity, or where the other company owns a common stock interest in the Company in excess of 5% of total shareholder’s equity, the director is not independent. 3) An independent director is not and is not affiliated with an entity that is an adviser or consultant to the
Company or a member of the Company’s senior management.
4) An independent director has no personal services contract(s) with the Company or a member of senior management of the Company.
5) An independent director is not affiliated with a not-for-profit entity that receives significant contributions from the Company (defined as the greater of $1 million or 2% of the not-for-profit entity’s consolidated gross revenues).
6) An independent director is not employed by a public company at which an executive officer of the Company serves as a director.
7) If a Company director is an executive officer of another company that is indebted to the Company, or to which the Company is indebted, and the total amount of either company’s indebtedness to the other is greater than 5% of the total consolidated assets of the company that he/she serves as an executive officer, the director is not independent.
8) A director elected pursuant to any arrangement or understanding with another person or group is not an independent director.
9) An independent director does not serve, and has no immediate family member who has served, as an executive officer or general partner of an entity that has received an investment from the Company or any of its subsidiaries, where such investment exceeds $1 million or 2% of such entity’s invested capital, whichever is greater, in any of the last three years.
10) An independent director does not have, nor may any immediate family member have, any direct or indirect material interest in a transaction or series of transactions to which the Company or a subsidiary is a party in which the transaction amount exceeds $120,000 (other than interests arising solely from an aggregate ownership interest of less than 10% of the Company or an entity furnishing services to the Company).
11) An independent director has not, and his/her immediate family members have not, accepted or agreed to accept from the Company any consulting, advisory or other compensatory fee except fees received for service as a director.
All directors other than those deemednot“independent” under the foregoing standards will be deemed to be “independent” upon a Board determination.
These independence standards are available on the Company’s website by going to
www.torchmarkcorp.com and clicking on the Investor Relations page. They are located under the Corporate Governance heading.
Based on these categorical standards and after evaluation of the directors’ responses to an annual questionnaire, which included questions based on the above-described independence criteria as well as any related party transactions disclosable pursuant to Item 404(a) of SEC Regulation S-K, the Governance and Nominating Committee made recommendations to the Board of Directors regarding director independence on February 26, 2008 and February 26, 2009. Accordingly, as of the February 26, 2008 and February 26, 2009 Board meetings, the Board determined that the following directors continue to meet the categorical standards set by the Board and are “independent”: Charles E. Adair, David L. Boren, M. Jane Buchan, Robert W. Ingram, Joseph L. Lanier, Jr., Lloyd W. Newton, Sam R. Perry and Paul J. Zucconi. Mark S. McAndrew (as a Company employee) and Lamar C. Smith (because of the three year look-back period associated with related party transactions between certain Company subsidiaries and First Command Financial Services, Inc. and its subsidiaries, where Mr. Smith served as an executive officer and/or employee until his September 30, 2007 retirement) are not considered “independent”.
Executive Sessions
Torchmark’s non-management directors have since October, 2002 met in regularly scheduled executive sessions without any management participation by officers or employee directors. These executive sessions are currently held either before, after or otherwise in conjunction with the Board’s regularly scheduled, physically-held meetings each year. Additional executive sessions can be scheduled at the request of the non-management directors. Beginning in 2004, at least one executive session per year is conducted with only independent directors present.
The director who presides over the executive sessions is the Chair of the Governance and Nominating Committee. If that director is not present, another independent director will be chosen by the executive session to preside.
You may communicate with Torchmark’s non-management directors by writing to the Executive Session of the Torchmark Corporation Board of Directors in care of the Corporate Secretary at 3700 South Stonebridge Drive, McKinney, Texas 75070.
Communications with the Board of Directors
Security holders of the Company and other interested parties may communicate with the full Board of Directors by writing to the Board or a specific director or directors in care of the Corporate Secretary at 3700 South Stonebridge Drive, McKinney, Texas 75070.
Governance Guidelines and Codes of Ethics
Torchmark has adopted Corporate Governance Guidelines, a Code of Ethics for the CEO and Senior Financial Officers, and a Code of Business Conduct and Ethics for its directors, officers and employees, all of which comply with the requirements of securities law, applicable regulations and New York Stock Exchange rules. These documents are available on the Company’s website by going to www.torchmarkcorp.com and clicking on the Investor Relations page. They are located under the Corporate Governance heading. Printed copies of these documents may be obtained at no charge by writing the Corporate Secretary at 3700 South Stonebridge Drive, McKinney, Texas 75070.
Committees of the Board of Directors
The Board of Directors has the following standing committees more fully described below: Audit, Compensation and Governance and Nominating. The Board may also, from time to time, name additional special committees.
Audit Committee—The Audit Committee is currently comprised of Messrs. Zucconi (2008 Chairman), Adair, Ingram and Perry. As of the date of this Proxy Statement, all members of the Audit Committee are independent under the definition contained in the NYSE rules and fully comply with SEC rules and regulations.
The Audit Committee reviews and discusses with management and the independent auditors the Company’s audited financial statements and quarterly financial statements prior to filing, the Company’s earnings press releases and financial information and earnings guidance, and the Company’s policies for risk assessment and management; selects, appoints, reviews and, if necessary, discharges the independent auditors; reviews the scope of the independent auditors audit plan and pre-approves audit and non-audit services; reviews the adequacy of the Company’s system of internal controls over financial reporting; periodically reviews pending litigation and regulatory matters; reviews the performance of the Company’s internal audit function, reviews related party disclosures to assure that they are adequately disclosed in the Company’s financial statements and other SEC filings and reviews and appropriately treats complaints and concerns regarding accounting, internal accounting controls or auditing matters pursuant to a confidential “whistleblower” policy. Additionally, the Audit Committee meets with the Company’s independent accountants and internal auditors both with and without management present. The Audit Committee met eleven times in 2008 (three physically-held meetings and eight teleconference meetings).
The Audit Committee has a written charter, which is annually reviewed and updated if necessary. The committee charter is posted on the Company’s website and can be viewed by going towww.torchmarkcorp.com
and clicking on the Investor Relations page. The committee charter is located under the Corporate Governance heading. You may also obtain a printed copy of the committee charter at no charge by writing the office of the Corporate Secretary at 3700 South Stonebridge Drive, McKinney, Texas 75070.
Compensation Committee—The Compensation Committee is currently comprised of Messrs. Lanier (2008 Chairman), Newton and Boren and Ms. Buchan. All members of the Compensation Committee are independent under the rules of the NYSE, Section 16 of the Securities Exchange Act of 1934 and Section 162(m) of the Internal Revenue Code.
The Compensation Committee determines the Company’s stated general compensation philosophy and strategy; reviews and determines the compensation of senior management of the Company and its subsidiaries at certain levels, including establishing goals and objectives for the Chief Executive Officer’s compensation, evaluating the CEO’s performance in light thereof, and recommending his total compensation to the independent directors serving on the Board for their approval; establishes the annual bonus pool; administers the Company’s Section 162(m) bonus plan and stock incentive plan; and makes recommendations to the Board with respect to non-CEO executive compensation, incentive compensation plans and equity-based plans. The Compensation
Committee is authorized to employ its own independent compensation consultant and has chosen to retain Mercer Human Resources Consulting. The Compensation Committee receives input and recommendations from the Chief Executive Officer and other members of Company management on compensation matters more fully described in the Compensation Discussion and Analysis section of this Proxy Statement and delegates certain day to day administrative functions for implementation of its compensation decisions and programs to Company officers. The Compensation Committee held five physical meetings and executed one unanimous written consent in 2008.
The Compensation Committee has a written charter, which is reviewed annually and updated if necessary. A copy of this charter is available on Torchmark’s website by going towww.torchmarkcorp.comand clicking on the Investor Relations page. The committee charter is located under the Corporate Governance heading. You may also obtain a printed copy of the committee charter at no charge by writing the Corporate Secretary at 3700 South Stonebridge Drive, McKinney, Texas 75070.
Compensation committee interlocks and insider participation—Torchmark has no compensation committee interlocks or insider participation as defined by Item 407(e)(4) of SEC Regulation S-K.
Governance and Nominating Committee—The Governance and Nominating Committee is currently comprised of Messrs. Adair, Boren (2008 Chairman), Ingram, Lanier, Newton, Perry and Zucconi and Ms. Buchan. All members of the Governance and Nominating Committee are independent under the NYSE rules as of the date of this Proxy Statement.
The Governance and Nominating Committee has the following duties and responsibilities: (1) receiving and evaluating the names and qualifications of potential director candidates; (2) identifying individuals qualified to become Board members consistent with criteria set by the Board of Directors and recommending to the Board director nominees; (3) recommending the directors to be appointed to Board committees and the committee chairs; (4) developing and recommending to the Board a set of governance guidelines for the Company; (5) monitoring and annually evaluating how effectively the Board and Company have implemented the corporate governance guidelines; and (6) overseeing evaluations of the Board and Company management. The Governance and Nominating Committee held three physical meetings in 2008.
The Governance and Nominating Committee will receive, evaluate and consider the names and qualifications of any potential director candidates from all sources, including shareholders of the Company. Recommendations of potential director candidates and supporting material may be directed to the Governance and Nominating Committee in care of the Corporate Secretary at 3700 South Stonebridge Drive, McKinney, Texas 75070.
The Governance and Nominating Committee has a written charter, which is reviewed annually and updated if necessary. A copy of this charter is available on Torchmark’s website by going to www.torchmarkcorp.com
and clicking on the Investor Relations page. The committee charter is located under the Corporate Governance heading. You may also obtain a printed copy of the committee charter at no charge by writing the office of the Corporate Secretary at the address set out above.
Director Qualification Standards
Torchmark’s Corporate Governance Guidelines discuss the following director qualification standards: 1. Board Membership Criteria, including independence, limits on the number of boards on which a director
serves, a former chief executive officer’s Board membership and directors who change their present job responsibilities;
2. Size of the Board; 3. Term Limits;
4. Retirement Policy; and
5. Selection of the Chairman of the Board.
More detail regarding these director qualification standards can be found in the Corporate Governance Guidelines by going to the Company’s website at www.torchmarkcorp.com and clicking on the Investor Relations page. The Guidelines are located under the Corporate Governance heading. Printed copies of the Guidelines may be obtained at no charge by writing the Corporate Secretary at 3700 South Stonebridge Drive, McKinney, Texas 75070.
Additionally, the Governance and Nominating Committee and the Board of Directors of Torchmark adopted the following statements on Qualifications of Directors and Procedures for Identifying and Evaluating Director Candidates on April 29, 2004:
Torchmark Corporation Qualifications of Directors
In addition to any other factors described in Torchmark’s Corporate Governance Guidelines, the Governance and Nominating Committee and the Board of Directors should at a minimum consider the following factors in the nomination or appointment of members of the Board:
1. Integrity: Directors should have integrity and be of personal and professional ethical character.
2. Absence of Conflicts of Interest: Directors should not have any interests that would materially impair his or her ability to exercise independent judgment or otherwise discharge the fiduciary duties owed by a director to the Company and its shareholders.
3. Achievement/Experience: Directors should have experience in management or at the policy-making level in one or more fields of business, government, education, technology, science, or community/civic affairs. 4. Business Understanding: Directors should have a general appreciation regarding major issues facing public
companies of size and operational scope similar to that of the Company, including business strategy, business environment, corporate finance, corporate governance and board operations.
5. Oversight: Directors should have the ability to exercise sound business judgment.
6. Available Time: Directors should have sufficient time to effectively carry out their duties, including preparing for and attending Board meetings, meetings of the Board committees on which they serve and the Annual Meeting of Shareholders, after taking into consideration their other business and professional commitments.
7. Age: Directors must comply with the Board established retirement age limits for directors.
8. Independence: Directors should be independent in their thought and judgment and be committed to enhancing long-term value for all shareholders. A majority of the Board must be independent directors, as defined by the New York Stock Exchange.
9. Diversity: Directors should be selected so that the Board reflects appropriate diversity.
Under exceptional and limited circumstances, the Governance and Nominating Committee and Board may approve the candidacy of a director nominee who may not necessarily satisfy all of these criteria, if they believe the service of that nominee is in the best interests of the Company and its shareholders.
Procedures for Identifying and Evaluating Director Candidates
1. Chairman and CEO, the Governance and Nominating Committee or other Board Member identifies need (a) to add new Board Member meeting specific criteria or (b) to fill a vacancy on the Board.
2. Governance and Nominating Committee initiates search, working with Company staff support and seeking input from other Board Members and Senior Company Management. The Governance and Nominating Committee may also engage a professional search firm to assist in identifying director candidates if necessary.
3. Candidates that will satisfy any specific criteria and otherwise qualify for membership on the Board, are identified and presented to the Governance and Nominating Committee.
4. The Chairman and CEO and at least one Member of the Governance and Nominating Committee will interview prospective candidate(s).
5. Governance and Nominating Committee meets to consider and approve final candidate. 6. Governance and Nominating Committee seeks full Board endorsement of selected candidate.
7. In making its selection, the Governance and Nominating Committee will evaluate candidates proposed by shareholders under criteria similar to the evaluation of other candidates.
Board and Annual Shareholder Meeting Attendance
During 2008, the Board of Directors held five physical meetings and one teleconference meeting. In 2008, all of the directors attended at least 75% of the meetings of the Board and the committees on which they served. The Board also acted twice by unanimous written consent.
Torchmark has a long standing policy that the members of its Board of Directors be present at the Annual Meeting of Shareholders, unless they have an emergency, illness or an unavoidable conflict. At the April 24, 2008 Annual Meeting of Shareholders, all ten directors were present.
